An electricity crunch is driving high bills in these states. It’s not getting better anytime soon

Residents of mid-Atlantic states like Maryland, New Jersey and Pennsylvania who have spent years plagued by high electricity bills just got some bad news: Relief is not on the way.

As CNN recently reported, utility customers in Maryland and Washington, DC, are some of the first in the country to see the effects of the data center boom show up on their residential electricity bills. Much of that price increase is due to the anticipation of future demand. The energy industry can see that data centers and other customers are going to be pulling a lot more power just a few years from now. There’s not currently supply to meet that, so access to the extra electricity that will be needed soon must be secured in advance.

In the mid-Atlantic, those purchases are made through regional auctions. At a recent one, prices hit a record high — and would have gone up even more if not for a price cap set in the wake of a lawsuit brought by Pennsylvania Gov. Josh Shapiro.

Both the auction prices and the lawsuit reflect a growing dynamic in the region, which is home to the world’s largest cluster of data centers — in Virginia — and more being added in other states including Ohio and Maryland. Data centers are consuming far more power than currently exists on the grid, driving prices higher amid a scramble to own the rights to future power.

The auctions are run by PJM Interconnection, a little-known nonprofit whose goal is to ensure that there’s enough electricity to meet demand and to move it where it’s needed in the region. Other states in PJM’s purview, including New Jersey, are also seeing spiking utility bills. Democrats in New Jersey seized on the issue in this year’s governor’s races. Democratic Gov.-elect Mikie Sherrill campaigned heavily on the issue of energy affordability.

That dynamic will continue in the near future, experts said.

“I expect the supply scarcity will last a few more years and that most of the 65 million people in the region will be paying higher bills for that long,” said Rob Gramlich, CEO of consulting firm Grid Strategies LLC. “It is a shame that states and PJM failed to insulate consumers from volatile power markets.”

PJM acknowledged the drastic imbalance between electricity supply and demand. Already in the past two years, prices have jumped more than 1,000%.

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply,” Stu Bresler, PJM’s incoming chief operating officer, said in a statement, adding that “the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself.”

The problem for customers is that prices will stay high until there’s more electricity being generated, and the cost of building new power plants and the infrastructure to move electricity will also be expensive.

In the past two years, PJM has proposed over $11 billion or more in electrical infrastructure upgrades in the region, primarily to serve new data center load growth, and another $12 billion could be needed in the coming year, said Maryland People’s Counsel David Lapp, the state’s top official focused on consumer advocacy for utility bills.

“The majority of those costs will be paid for by all customers even though the costs almost entirely are the result of data center development,” Lapp told CNN in an email.

For now, even these record auction prices aren’t enough to make ends meet, from a supply perspective. The latest PJM auction secured about 134,479 megawatts of power, which fell short of the amount the grid operator said it needs to ensure reliability for the region.

The Electric Power Supply Association, a trade group for power plant operators, said it was focused on bringing new generation online.

“Data centers can be built faster than new supply resources, like power plants,” Lapp said. “The market is not competitive because projected demand exceeds supply and new supply can’t be timely built to restrain prices.”

In a recent filing to the Federal Energy Regulatory Commission, Shapiro said the regional grid operator must reform its system to protect consumers from rising costs.

If that doesn’t happen in the coming year, “the Commonwealth will be forced to take action to protect its ratepayers from unjustifiable price spikes,” Shapiro wrote. “The PJM region is facing an affordability and reliability crisis. The problem is not new, but it is growing worse.”